DoD 7000.14 - R DEPARTMENT OF DEFENSE FINANCIAL …

DoD 7000.14 - R

DEPARTMENT OF DEFENSE FINANCIAL MANAGEMENT REGULATION

VOLUME 4: "ACCOUNTING POLICY" UNDER SECRETARY OF DEFENSE (COMPTROLLER)

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Financial Management Regulation

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VOLUME 4, CHAPTER 1: "FINANCIAL CONTROL OF ASSETS"

SUMMARY OF MAJOR CHANGES

Changes are identified in this table and also denoted by blue font.

Substantive revisions are denoted by an asterisk (*) symbol preceding the section, paragraph, table, or figure that includes the revision.

Unless otherwise noted, chapters referenced are contained in this volume.

Hyperlinks are denoted by bold, italic, blue, and underlined font.

The previous version dated September 2008 is archived.

PARAGRAPH

1.1 and 2.2 (010101 and

010202)

1.3 (010103)

2.4 (010204)

3.4 (010304)

6.1 (010601)

6.2 (010602)

7.1 (010701)

EXPLANATION OF CHANGE/REVISION Updated definition of Assets. Delineated that fiduciary assets meeting the definition in the Statement of Federal Financial Accounting Standards 41 are not reported on the Federal Entity's Balance Sheet. Added an Authoritative Guidance paragraph. Updated Entity versus Nonentity Assets description and reporting requirements. Updated Accounting Requirements for Cash.

Updated examples of Advances.

Updated definition of Prepayments.

Updated definition of Property, Plant, and Equipment.

PURPOSE Revision

Addition Revision Revision Revision Revision Revision

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Financial Management Regulation Table of Contents

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VOLUME 4, CHAPTER 1: "FINANCIAL CONTROL OF ASSETS"........................................ 1

1.0 GENERAL (0101) ......................................................................................................... 4

*1.1

Overview (010101) .............................................................................................. 4

1.2

Purpose (010102) ................................................................................................. 4

*1.3

Authoritative Guidance (010103) ........................................................................ 4

*2.0 ACCOUNTING REQUIREMENTS (0102).................................................................. 5

2.1

Accounting Requirements Overview (010201) .................................................. 5

*2.2

Definition of Asset (010202) ............................................................................... 5

2.3

Noncash Assets (010203)..................................................................................... 5

*2.4

Entity Versus Nonentity Assets (010204)............................................................ 6

2.5

Intragovernmental Versus Public Transactions (010205).................................... 6

2.6

Accounting Events (010206)................................................................................ 6

3.0 FUND BALANCE WITH TREASURY AND CASH (0103) ...................................... 6

3.1

Fund Balance with Treasury (FBWT) Policy (010301)....................................... 6

3.2

Cash Held Outside of Treasury (010302) ............................................................ 7

3.3

Restricted Cash (010303) ..................................................................................... 7

*3.4

Accounting Requirements for FBWT and Cash (010304)................................... 7

4.0 RECEIVABLES (0104) ................................................................................................. 8

4.1

Receivables Overview (010401) .......................................................................... 8

4.2

Recognition of Receivable (010402) ................................................................... 8

5.0 INVENTORY AND RELATED PROPERTY (0105) .................................................. 9

5.1

Definition of Inventory and Related Property (010501) ...................................... 9

5.2

Operating Materials and Supplies and Stockpile Materials (010502) ................. 9

6.0 ADVANCES AND PREPAYMENTS (0106)............................................................... 9

*6.1

Advances (010601) .............................................................................................. 9

*6.2

Prepayments (010602) ......................................................................................... 9

6.3

Reporting Intragovernmental Transactions (010603) ........................................ 10

7.0 PROPERTY, PLANT, AND EQUIPMENT (PP&E) (0107) ...................................... 10

*7.1

Definition of PP&E (010701) ............................................................................ 10

7.2

Recording General PP&E Assets (010702) ....................................................... 10

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Financial Management Regulation Table of Contents (Continued)

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8.0 OTHER ASSETS (0108) ............................................................................................. 10

8.1

Other Assets Classified (010801)....................................................................... 10

8.2

Financial Control (010802) ............................................................................... 11

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FINANCIAL CONTROL OF ASSETS

1.0 GENERAL (0101)

*1.1 Overview (010101)

Assets are items owned by the federal government which have probable (more likely than not) economic benefits that can be obtained or controlled by a Federal Government entity. A Department of Defense (DoD) asset is any item of economic value owned by a DoD Component or held in a fiduciary capacity under the control of a DoD Component. However, fiduciary assets matching the definition outlined in the Statement of Federal Financial Accounting Standard (SFFAS) 31, "Accounting for Fiduciary Activities" must not be recognized on the Balance Sheet of the Federal entity. These assets are defined as "the collection or receipt, and the subsequent management, protection, accounting, investment and disposition of cash or other assets in which non-Federal individuals or entities ("non-Federal parties") have an ownership interest that the Federal Government must uphold. The fiduciary relationship must be based on statutory or other legal authority and the fiduciary activity must be in furtherance of that relationship."

1.2 Purpose (010102)

This chapter sets forth overall standards for the DoD Components to follow in accounting for assets. One of the objectives of DoD accounting is establishing financial control, from time of acquisition to time of disposal, over all assets provided to, or acquired by, the DoD. Such control ensures proper and authorized use as well as adequate care and preservation, since no asset can be acquired, put into use, transferred, written down, written off, or disposed of, without the proper authorization necessary to document and record the transaction. Account for all tangible assets provided to the DoD including assets in transit and assets in the hands of contractors, private parties, and other government agencies.

*1.3 Authoritative Guidance (010103)

The accounting policy and related requirements prescribed by this chapter are in accordance with the applicable provisions of:

1.3.1. Financial Accounting Standards Advisory Board (FASAB) Statement of Federal Financial Accounting Concepts (SFFAC) 6, "Distinguishing Basic Information, Required Supplementary Information, and Other Accompanying Information;"

1.3.2. FASAB SFFAS 1, "Accounting for Selected Assets and Liabilities;"

1.3.3. FASAB SFFAS 3, "Accounting for Inventory and Related Property;"

1.3.4. FASAB SFFAS 6, "Accounting for Property, Plant, and Equipment;"

1.3.5. FASAB SFFAS 8, "Supplementary Stewardship Reporting;" 1-4

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1.3.6. FASAB SFFAS 31, "Accounting for Fiduciary Activities;"

1.3.7. Office of Management and Budget (OMB) Circular A-136, "Financial Reporting Requirements;"

1.3.8. The United States Department of the Treasury (Treasury) Bureau of the Fiscal Service Treasury Financial Manual (TFM), Volume 1, Part 2, Chapter 3200, "Foreign Currency Accounting and Reporting;"

1.3.9. TFM Volume 1, Part 2, Chapter 3400, "Accounting for and Reporting on Cash and Investments Held Outside of the United States (U.S.) Treasury;"

1.3.10. TFM Volume 1, Part 2, Chapter 5100, "Reconciling Fund Balance with Treasury Accounts;" and

1.3.11. Department of Defense Instruction (DoDI) 5000.64, "Accountability and Management of DoD Equipment and Other Accountable Property."

*2.0 ACCOUNTING REQUIREMENTS (0102)

2.1 Accounting Requirements Overview (010201)

Sections 0103 through 0108 provide policy on specific accounting requirements for various categories of assets. The general requirements prescribed in this section apply to all assets.

*2.2 Definition of Asset (010202)

An asset is a resource that embodies economic benefits or services that DoD controls. An asset has two essential characteristics:

2.2.1. It embodies economic benefits or services that can be used in the future; and

2.2.2. The DoD controls access to the economic benefits or services and, therefore, can obtain them or deny or regulate the access of other entities.

2.3 Noncash Assets (010203)

Noncash assets will be valued promptly, once acquired by or taken into possession by the DoD, and subjected to financial accounting control. For purposes of this paragraph, promptly means no later than the entity's fiscal year-end.

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*2.4 Entity Versus Nonentity Assets (010204)

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DoD Components report entity assets separately from nonentity assets in Note 2 of the entity's financial statements. The entity's Balance Sheet combines entity assets and nonentity assets.

2.4.1. Entity assets are assets that the reporting DoD Component has authority to use in its operations, that is to say, the DoD Component has the authority to decide how the asset is used, or is legally obligated to use the asset to meet statutory obligations.

2.4.2. Nonentity assets are assets held by a DoD Component but are not available for the Component to use in its operations. In some circumstances, a DoD Component may maintain cash or other nonentity assets in a fiduciary capacity for the Treasury, other government agencies or non-federal entities. DoD Components must report both entity assets and nonentity assets under an entity's custody or management in the entity's financial statements. However, DoD Components must not recognize on the Balance Sheet nonentity assets meeting the definition of fiduciary assets, but should disclose them in accordance with the provisions of FASAB SFFAS 31. Disclose in Note 2 of the entity's financial statements nonentity assets reported on an entity's Balance Sheet in accordance with OMB Circular A-136, Section II 4.3.3 Assets; see also Volume 6B, Chapter 10. Recognize an amount equal to nonentity assets as a liability (due to Treasury or other entities) on the Balance Sheet.

2.5 Intragovernmental Versus Public Transactions (010205)

2.5.1. Intragovernmental assets arise from transactions among Federal Agencies and represent claims of a Military Department or Defense Agency against other DoD Components and other Federal Agencies.

2.5.2. Public assets arise from transactions between DoD Components and non-federal entities, which include domestic and foreign persons and organizations outside the U.S. Government. The term "public" can also be used to represent non-federal entities.

2.6 Accounting Events (010206)

The accounting events discussed in Chapters 2 through 7 frequently will require compound accounting entries; that is, accounting entries must be made simultaneously in both the proprietary accounts and the budgetary accounts. Additional information on budgetary accounts, not covered in this chapter, is included in Volume 3.

3.0 FUND BALANCE WITH TREASURY AND CASH (0103)

3.1 Fund Balance with Treasury (FBWT) Policy (010301)

FBWT is an asset account that reflects the available funds in the entity's accounts with Treasury that authorizes the entity to make expenditures and pay liabilities. Collections and disbursements by the Department increase or decrease the balance of the account. Treasury requires all federal agencies to reconcile their FBWT accounts on a regular and recurring basis to assure the

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integrity and accuracy of their internal and Government wide financial data. Any differences identified during the reconciliation process must be researched and resolved. Reconciliation documentation (including support for any adjustments required) must be prepared and retained. Evidence of review and approval for the reconciliation and any adjustments must be contained in the documentation. Unresolved differences compromise the reliability of FBWT balances and Treasury's published financial statements. This, in turn, compromises the overall integrity and status of the Department's and Government wide financial position. Chapter 2 provides more detailed information on accounting for cash and FBWT.

3.2 Cash Held Outside of Treasury (010302)

In limited circumstances, in addition to "FBWT," DoD reporting entities may be authorized to hold cash outside of Treasury to provide check-cashing services in accordance with Volume 5. Cash includes all monetary resources on hand or on deposit with banks and other financial institutions, including coins, currency, and readily negotiable instruments (such as checks and money orders).

3.3 Restricted Cash (010303)

Restrictions are usually imposed on cash deposits by law, regulation, or agreement. Nonentity cash is always restricted cash. Entity cash may be restricted for specific purposes. Such cash may be in escrow or other special accounts. Financial reports should disclose the reasons and nature of restrictions.

*3.4 Accounting Requirements for FBWT and Cash (010304)

The requirements prescribed by this paragraph apply to accounting for FBWT and cash.

3.4.1. FBWT and Cash accounting will:

3.4.1.1. Be complete, accurate and timely.

3.4.1.2. Cover cash receipts, cash disbursements, and cash balances.

3.4.1.3. Comply with applicable laws and regulations.

3.4.1.4. Disclose errors, losses, and gains. DoD Components must identify, resolve and correct errors on a timely basis as detailed in Chapter 2.

3.4.2. Record cash receipts immediately upon collection, kept under control, and deposited intact as soon as practicable. Disbursing Officers (DOs) and their cash agents may hold cash collections for operating requirements within their cash-holding authority.

3.4.3. Make cash disbursements only after receiving an approved voucher package containing evidence of performance (i.e., receipt of goods and/or services via DD Form 250, Material Inspection and Receiving Report), a valid purchase order, and a valid invoice. Cash

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